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How to Manage Student Loan Debt as a Freelancer

When it comes to paying off student loans, self-employed workers face unique challenges. Having to keep up with monthly payments with a variable income can be extremely stressful. However, the good news is that there are federal student loan repayment plans freelancers can take advantage of to make managing their loans easier and less complicated. While self-employed workers with private loans have fewer options than those with federal loans, they can choose to refinance their loans to secure a lower monthly payment and interest rate.

If you’re self-employed and struggling to repay your student loans, a student loan lawyer can be a great resource for figuring out the best repayment plan for your situation. While overwhelming, taking charge of your loan situation is the best way to ensure you avoid going into default. Here are some helpful tips on how to manage student loan debt as a freelancer.

Managing Your Student Loans as a Freelancer

There are some similarities in student loan management between freelancers and traditional full-time workers. For one, self-employed workers should take advantage of the same features available to full-time workers, such as discounted interest rates through automatic payments. However, freelancers tend to have varying levels of cash flow, which can make them more vulnerable to running into roadblocks with repayment. Therefore, in order to avoid delinquency and default, it’s important for freelancers to arrange the best loan repayment terms for their situation.

Federal Repayment Options for Freelancers

There are a lot of repayment options available to freelancers with federal student loans. Deferment, forbearance, and income-driven repayment plans are a few of the options available to individuals with federal loans. Deferment and forbearance can postpone your payments, offering a short-term solution. However, if you plan on staying self-employed for the foreseeable future, you’ll need a more sustainable strategy for loan management.

Income-driven repayment (IDR) plans are a great option for lowering your monthly payment. IDR repayment plans set your monthly payments at a percentage of your income, loan balance, and family size. In order to secure an IDR, you’ll need to complete an IDR plan request and provide proof of your income through a tax return or pay stub. Since most freelancers have variable income throughout the year, you can contact your loan servicer to update your income during slow periods.

Are Freelancers Eligible for Loan Forgiveness?

Unfortunately, federal student loan forgiveness programs are typically only available to full-time workers in qualifying jobs, such as teachers and nurses in high-need locations. Unless you work for an eligible non-profit full-time on a 1099-MISC, you probably won’t qualify for loan forgiveness. However, if you elect for an IDR, your loans will be forgiven after 20-25 years.

Managing Private Student Loans as a Freelancer

Although there are fewer options available to freelancers with private loans, there are still ways to make private loans more manageable. While lenders used to require individuals to have a traditional full-time job to be eligible to refinance, today, most lenders are solely concerned with your income—whether it is from a gig or an office job.

This means freelancers who can prove they are being paid on a regular basis could choose to refinance to secure a lower interest rate and monthly payment. It’s important to note that you’ll still need a good credit score to be eligible for a favorable refinancing option. Sometimes, self-employed workers can struggle to qualify for refinancing due to their credit score. For example, if you took out credit to start your business and have missed a couple of payments, your credit score might be too low to qualify.

Before You Refinance, Weigh the Pros and Cons

If you are self-employed and considering refinancing, it’s important to weigh the pros and cons. While refinancing can be a great choice for certain individuals, it can also be a bad decision for others. Specifically, since refinancing is irreversible—meaning you are stuck with your refinance terms once you commit to it—it’s important to make sure you can make the payments for the set timeframe.

Individuals with federal loans should take extra precautions before refinancing. Choosing to refinance your federal loans into a new private loan means you will lose eligibility for all of the federal programs and safety nets previously mentioned. Alternatively, if you have private loans, refinancing will most likely improve your situation by providing a lower monthly payment. However, refinancing usually comes with a longer-term, meaning you can also pay more in interest over time.

Contact a Skilled Arizona Student Lawyer Today

As a freelancer, it’s essential to be proactive about your student loans. Putting your student loans on the backburner can mean penalties will be added to your original loan balance. Additionally, failing to make your payments could negatively impact your credit score, ability to gain employment, and ability to secure loans for significant life purchases, like a house. If you are struggling to repay your student loans in Arizona, you should contact a skilled student loan lawyer. An experienced attorney can examine your loans and finances and determine the best repayment plan for your situation.

At McCarthy Law, our attorneys are dedicated to helping students navigate the complexities of the student loan system. Under our student loan debt settlement program, our licensed attorneys negotiate with lenders to reduce the interest rate and principal balance of your student loans. At the end of a successful negotiation, our clients pay only a fraction of their original loan balance. To schedule a consultation with one of our skilled student loan settlement attorneys, call (855) 976-5777 or fill out our online contact form.

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Kevin Fallon McCarthy

Kevin Fallon McCarthy is the McCarthy Law PLC’s managing attorney and an experienced Phoenix debt attorney. Mr. McCarthy has also worked as general counsel for a large corporation. He has corporate counsel experience in human resource matters, general corporate governance, and union class action litigation.